An Internship Report
Dedicated
To My
Parents
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An Internship Report
PREFACE
It is the requirement of the MBA course Al-Khair University, Multan that all students
of MBA have to spent two months in any organization to get practical exposure and to
get familiarized with the ways to live in the organizational environment which is
dramatically different from the educational environment. That two months period
called “Internship Period “, if spent properly and sincerely, enables the students to be
more confident, more knowledgeable, more responsible and, above all, more
committed to its work in the practical field. I have also been assigned to do internship
of six weeks period in MCB Jhang City Branch.
It has enabled me to understand the practical scenario and sharpen our
decision making power and utilizing the resources in an effective manner, so
that our resources generate maximum profit.
In preparing this report, I have put all of my best efforts and tried my level
best to give maximum knowledge. Despite of my all the coherent efforts, I
do believe that there will always be a room for improvement in the efforts of
learner like me.
Farhan Raza
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An Internship Report
Table of Contents
DESCRIPTION
PAGE #
Executive Summary
05
History of MCB
08
Head Office
13
Circle office
14
Prominent Features of MCB
15
General Banking Department
20
Current section
28
Financial Products/Services
28
Remittance section
37
Cash section
41
Clearing sections
45
Credits department
47
Agricultural Credits
65
Commercial Advances`
51
Foreign Exchange Department
58
Foreign Currency Accounts
60
Prime currency scheme
62
Imports & Exports
65
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Trade Terms
68
Letter of Credit
71
Duty Draw Backs
76
SWOT Analysis
79
Suggestions
83
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EXECUTIVE SUMMARY
The banking structure in Pakistan comprises of the following types, State Bank
of Pakistan, Commercial Bank of Pakistan; Exchange Banks, Saving banks,
Cooperative banks, Specialized credit institutions. The state bank of Pakistan is
the Central bank of the country and was established on July 01, 1948. The
network of bank branches now covers a very large segment of national
economy. The State Bank of Pakistan issues the shares of these periodically.
Bank employees and other common peoples can also purchase these shares and
earn profit. In 1956, MCB transferred its Registered office to Karachi, where
the Head Office is presently located. In April 1991, MCB became Pakistan’s
first privatized bank.
The corporate branch at Shahrah-e-Faisal Karachi (SFK) branch is the
corporate branch of MCB in Karachi. The bank is using SWIFT for transfer of
information about imports and exports.
MCB SFK branch has Currently
Following three Departments General Banking Department, Advances
Department & Foreign Exchange Department.
To open an account the customer has to meet the general banking manager with
an introducer. The procedure begins with the punching of account opening
form to the customer file i.e. customer’s master file.
Before closing any
account, bank send letter to the account hold for informing him that his account
is going to be closed. There is need an approval form higher authority to close
any account. Current deposits are those which are payable to bank whenever
demanded by the customer. Bank does not pay any profit on current deposits.
The following are the financial products/services of MCB Malay Mail Scheme,
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An Internship Report
PLS Account, Saving 365 Account, Capital growth certificate scheme, Fund
Management Scheme, Khushali Bachat Account, Term/ Fixed Deposits and
others like night banking, credit cards, traveler cheques.
In remittance department like any other bank MCB also have
instruments for transferring of money, Telegraphic Transfer, Mail
Transfer. In cash department both deposits and withdrawals go side by
side. This department works under the accounts department and deals
with cash deposits and payments. This department maintains the
following sheets, books, and ledger of account cash received voucher
sheet.
Cash paid voucher sheet, Paying-in-slip, ChequeBook, Cash balance
book. The clearing in Karachi at MCB or other banks is being done
through NIFT (National Institute of Facilitation Technology).
Bank provides this facility to the people who need advance money to
meet their requirement. Party dealing with other banks financial
condition of borrower business and as a first step credit proposal is
being made. MCB provides advances, which are two types. Secured
Advances, Unsecured Advances. MCB usually classified advances in to
following types Agricultural Advances, Commercial Advances
Industrial Advances. Commercial Advances are of following types
Demand Finance, Cash Finance, Foreign bills purchased, Financ e
against imported goods, Finance against foreign bills, Export Refinance
Part I (Pre Shipment) & others. Banks Agriculture division deals with
the agriculture advances. Bank provides the Agriculture Advances in
order to enhance and support the agriculture sector of the country. Farm
Credit & Non Farm Credit.
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In foreign exchange, MCB is dealing Foreign Currency Accounts,
Foreign Remittances, and Foreign Bills for Collection, Imports &
Exports
Foreign currency accounts & the foreign currency department deals with the
following types of accounts, Dollar Khushali account, Current account, Saving
bank account, Term deposit, Prime Currency Scheme. Foreign accounts are
convertible on floating rate available to the bank. Letter Of Credit facility is
being provided by MCB in foreign exchange.
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HISTORY OF BANKING
It has not so far been decided as to how the word ‘Bank’ originated. Some
authors opine that this word is derived from the words ‘Bancus’ or Banque’
which mean a bench. Other authorities hold the opinion that the word ‘Bank’
is derived from the German word ‘Back’, which means ‘joint stock fund’. It is
therefore, not possible to decide as to which of the opinion is correct, for no
record is available to ascertain the validity of any of the opinions.
Banking in fact is primitive as human society, for ever since man came to
realize the importance of money as a medium of exchange, the necessity of a
controlling or regulating agency or institution was naturally felt. Perhaps it
were the Babylonians who developed banking system as early as 2000 BC. IT
is evident that the temples of Babylon were used as ‘Banks’ because of the
prevalent respect and confidence in the clergy.
At the time of independence, there were 631 offices of scheduled banks in
Pakistan, of which 487 were located in West Pakistan alone. As a new country
without resources it was very difficult for Pakistan to run its own banking
system immediately. Therefore, the expert committee recommended that the
Reserve Bank of India should continue to function in Pakistan until 30th
September 1948, so that problems of time and demand liability, coinage
currencies, exchange etc. be settled between India and Pakistan. The nonMuslims started transferring their funds and accounts to India. By the end of
June 1948 the number of officers of
scheduled banks in Pakistan declined from 631 to 225. There were 19 foreign
banks with the status of small branch offices that were engaged solely in export
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of crop from Pakistan, while there were only two Pakistani institutions, Habib
Bank of Pakistan and the Australian Bank. The customers of the bank are not
satisfied with the uncertain condition of banking. Similarly the Reserve Bank
of India was not in the favor of Govt. of Pakistan. The Govt. of Pakistan
decided to establish a full-fledge central bank. Consequently the Governorgeneral of Pakistan Quaid-I-Azam inaugurated the State Bank of Pakistan on
July 1, 1948. Thus a landmark was made in the history of banking when the
state bank of Pakistan assumed full control of banking and currency in
Pakistan. The banking structure in Pakistan comprises of the following types.
 State Bank of Pakistan
 Commercial Bank of Pakistan
 Saving banks.
 Cooperative banks
 Specialized credit institutions.
Commercial banks have been the most effective mobilizers of savings and have
been providing short-term requirements of working capitals to trade, commerce
and industry.
Up to December 31, 1973, there were 14 Pakistan commercial banks that
functioned all over the country and in some foreign countries through a
network of branches. All these commercial banks were nationalized in January
1, 1974, and were recognized and merged into the following five banks:
 National Bank of Pakistan
 Muslim commercial bank limited
 Habib Bank Limited
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 United Bank Limited
 Allied Bank of Pakistan
The state bank of Pakistan is the Central bank of the country and was
established on July 1, 1948. The separation of East Pakistan and its
repercussion in the form of economic depression has caused a lot of difficulties
to the banking system in Pakistan. The network of bank branches now covers a
very large segment of national economy.
The numbers of branches have
increased appreciably and there is now on branch of bank for every 3000 heads
of population approximately. There is done reasonable growth in deposits from
the establishment of Pakistan. Besides this growth, specialized credit and
financial institutions have also developed over the years.
The Government of Pakistan in the late 90’s introducing the need for the
privatization of state owned banks and companies. The private sector has
accepted the challenge and most of the banks are privatized today. The State
Bank of Pakistan issues the shares of these periodically. Bank employees and
other common peoples can also purchase these shares and earn profit.
Throughout the period of banking history the banks have been expanding
rapidly and achieved the desired goal of progress.
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THE MUSLIM COMMERCIAL
BANK LIMITED
History
MCB was founded by ISFHANI and ADAMJEE families in Calcutta on July 9,
1947. MCB is not an overnight success story rather good track of services are
responsible for the leaps and bounds progress. After the partition of the IndoPak Subcontinent, the bank moved to Dhaka from where it commenced
business in August 1948. In 1956, the Bank transferred its Registered office to
Karachi, where the Head Office is presently located. Thus, the bank inherits a
52-year legacy of trust in its customers and the citizens of Pakistan.
CHANGE OF OWNERSHIP
The performance of MCB was badly affected by bureaucrat government.
In January 1974, MCB was nationalized by Bhutto Government following the
bank act 1974 subsequently in June 1974 Premier Bank Limited merged with
MCB.
PRIVATIZATION
In the late 1990 after long period of time newly established Democratic
Government of Pakistan have decided to sell nationalized assets of country for
better utilization. In April 1991, MCB became Pakistan’s first privatized bank.
The government of Pakistan transferred the management of the Bank to
National Group, a group of leading industrialists of the country by selling 26%
shares of the bank.
In terms of agreement between the Government of Pakistan and the National
Group, the group, making their holding 50% has purchased additional 24%
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shares. Now, 25% is purchased by the Government, which shall be sold in the
near future.
NEW MILLENNIUM
MCB besides being money financial organization have rendered invaluable
services in the economics and social developments of our country. MCB today,
represents a bank that has grown with time, experience and Pakistan. A major
financial institution, in scope and size, it symbolizes a fully-grown tree.
Evergreen, Strong, and firmly rooted.
PHILOSOPHY
MCB relies on strong, lasting relationship with its customers and on its
reputation for stability and security for its continued process. Its philosophy has
been to adopt steady course. It has pursued small, less risky loans to consumers
and business, and shied away from risky loans. MCB extends its philosophy to
its technology strategy but not perusing technology for technology's sake.
However, MCB learns from the mistakes of others especially in "consumer
banking". We let others get in first, take the hit, and find out the flows. Said
MCB officials - and has installed efficient and effective system for processing
and delivering information.
The board of directors has the authority in guiding Bank affairs and in making
general policies. Some directors are the personnel of the MCB Bank and others
are successful businessperson and executives of other major organization.
Nineteen members are included in board of directors.
HEAD OFFICE AT GLANCE
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I. I. Chudrigor Road of Karachi has same importance in Pakistan’s economy as
of the Wall Street in world economy. The division working under MCB Head
office are as follows:
 Administration
 Credit Management
 Investment Banking
 Human Resource
 Information Technology
 Corporate Planning & Budgeting
 Finance & Treasury
 International Division
 Inspection & Audit
 Law Division
 Marketing & Development
 Trustee Division
Under the President An Executive Committee and a Credit Committee works.
All the matter of the bank join to the board of director are presented to the
executive committee which is responsible for daily operation of the bank .The
request for credit exceeding the General Manager power is approved by the
Credit Committee. Under the area Executive is the General Manager who is the
in charge of the Circle Office. Under the General Manager is the Zonal
Manager and then the Branch Manager. At present, there are 9 circles, 47
regions and 1400+ branches. Before privatization there were provincial chiefs
for all the four provinces. But this management now has abolished the
provincial officers and improved the efficiency of the bank.
CIRCLE OFFICE
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The working of circle office is to control and regulate the functions of branches
which are under in its control. The functions of circle office is to mobilize the
deposits and receive reports from branches. Circle office is like a mini head
office. Agents and correspondents of MCB are in all commercial cities of the
world. Circle office is divided in the following division:
 Credit Management
 Audit & Inspection
 Human Resource
 Marketing & Development
Province
Circles
Region
Branches
Punjab
9
27
823
Sindh
5
12
278
Balochistan
1
2
35
NWFP & AJK
2
7
235
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PROMINENT FEATURES
SBP allowed exporters obtain foreign currency loans against firm contracts
L/Cs and MCB made arrangements for clients to use the facility at EPZ branch,
Karachi and off-Shore Banking Unit, Bahrain for the purpose. It also offered
services to clients for procuring foreign currency loans from abroad.
The other significant development is the launching of the MCB Imdad-eBahami Scheme for “Housing Improvement” in addition to commercial
lending, MCB has accepted the responsibility to offer social lending. The
scheme, launched with the co-operation of the Swiss institution aims at
providing easy credit to low income group is Urban areas to improve their
living condition. Other Prominent features are as follow:
 Committee Structure
 Organizational culture
 Customer Service
 Automation & Modernization
 International Appearance
 Employees Mgt Relation
 Human Resource
COMMITTEE STRUCTURE
MCB employs a very strong committee structure to oversee decision by
decentralized operations. Officers are given strict limit to authority. Within
prescribed limit, officers do indeed make their own decision- but according to
guidelines, procedures, and rules. Decision outside of prescribed limits are
taken to high-level committees.
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ORGANIZATIONAL CULTURE
Officers of the bank don't need to spend a lot of time into whether they should
consider issues or ideas. They just know their certain parameters beyond which
they won't go.
The employees in the organization are well dressed, well communicated and
well co-operative.
Officers learn what these parameters are through their experience with various
committees-through a process osmosis. In visiting and in participating on
committees, individuals get to see what their cohorts are doing. Cross fertilization of ideas occurs and, often, morale is helped. Major corporate
policy changes occur through a process of involvement by levels of
management.
CUSTOMER SERVICE
Perhaps the most important yardstick for testing the success oriented
organization is in the area of customer services and it is in this very sphere that
MCB have made the leading strides. To eliminate delays in dealing with credit
proposals, of which complaints were frequent is the past, an effective three lier
system was introduced instead of six lier system. Under this new system
adequate sanctioning powers were delegated to Branch, Regional and General
Managers and also to the senior executives in charge of credit at the Head
Office. Only proposals exceeding their powers are now considered in the
credit/executive committee.
As a part of the new system, the role of the Head office was redefined from
supervisory to supporting only the inspection division at the Head Office now
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has a supervising role for ensuring the implementation of the Bank’s
Directives.
The new policy and the restructuring of the system had a two fold positive
outcome. Customer were provided improved services and needed facilities. The
Bank’s executives and other staff come to possess a new sense of confidence
and dignity in their jobs.
Automation & Modernization
The project of on line banking has been successfully introduced and provides
customer with the facility to operate from any branch in the network, so for,
more than 80 branches have been connected to the MCB Data Network
between/among Karachi, Lahore, Rawalpindi, Hyderabad, Multan and
Islamabad.
The bank has installed a number of Automated Teller Machines (ATM) to
provide 24 hours cash facility to its customer. ATMs have been installed at 40
branches in Karachi, Lahore and Islamabad. The network have been expanded
to Multan and Faisalabad since 1997. The ATM at Karachi airport has also
started functioning and those at Lahore and Islamabad airport have been interlinked in 1997.
Swift
The bank has also started replacing conventional telex messaging system for
fund transfer, L/C opening etc., by connecting on-line with the world wide
interbank Financial Telecommunication Network (SWIFT). So for, MCB has
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An Internship Report
on line 20 branches in Karachi, Lahore, Faislabad, Gujranwala and Sialkot on
SWIFT, to meet foreign correspondence requirement.
Human Resource
The bank has five special importance to the aspect of training and career
planning of its staff members. Forwards this main objective, several training
courses have been organized initiating a self development process, in order to
accelerate organizational growth and to further improve the Bank’s level of
expertise and efficiency.
In 1998, a total of 576 courses were conducted which covered a wide variety of
topics connected with banking and customer services. An aggregate numbers of
8,776 staff member participated.
Additionally 245 officers and executive took part in training courses and
seminars conducted by professional institution, such as institute of Bankers
Management Association of Pakistan, Pakistan Institute of Management and
Pakistan Banking Council. Eight executive also participated in courses
conducted is foreign countries.
The MCB executive development centre, set up in November, 1995 for used
attention an the development and grooming of our executives. Eminent
scholars and specialists were invited, during 1996, to apprise our executives of
new concepts and techniques to keep abreast of the constant changes taking
place locally and globally. A total of 54 seminars were held this year in which
518 executive participated.
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International Appearance
After the closing down of the London operations prior to privatization, MCB
was left with no foreign branches and operations. In 1994 as planned the bank
opened up its international operations by inaugurating its branches in Dakha
and Colombo. More branches are operating in Pettah, Srilanka and Chittagang.
Access to Middle East and Africa is in progress.
Employees Management Relation
The employee management relations remained cordial. Up-to-now more than
290 offspring of the employees are inducted in the bank as cashier and typists
on merit basis. Extensive training PROGRAMME for the employees continued
to supplement their capabilities.
The management is indebted to the employees for sharing its vision and dream
to make MCB the best Bank of the country, that is client driven, preferred by
the customers and tested on the touch- stone of customer satisfaction.
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General
Banking
Department
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GENERAL BANKING
It is backbone of banking It is one of the major department of MCB. It consist
of following departments:
 Accounts Department
 Current Department
 Remittance Department
 Clearing Department
 Cash Department
ACCOUNTS DEPARTMENT
Every transaction which takes place recorded in the computer so all
transactions in different departments are forwarded to account department.
Since all vouchers from different departments are forwarded to current
department so this department tallies all such transactions with current
department after maintaining the ledger of each department. Following are
different functions performed by this department:
 Preparation of Financial Statements for different time span
 Maintain all accounts of different departments
 Calculation of profit on different schemes
 Calculation of markup on different advances
 Preparation Different types of reports for State Bank
 Daily position of cash & every accounts
 Matching daily summaries of all departments with ledger
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CURRENT DEPARTMENT
This department maintains all formalities of the accounts and account holders
like it account name, account holder’s name, code number and full address.
Different cheques debit and credit voucher come form different departments
like Token, Clearing, Remittances, Cash, Foreign Exchange, Advances and
posted against different accounts.
A working Journal called Manual is prepared daily which shown the balance
accounts of all parties. Mark-up and profit are calculated daily. That would be
debited at credited from or to account holder’s account after specific period of
time.
Markup is debit from the account after every three month profit is credited to
accounts after every six month. New accounts are also opened in this
department. The fund deposited in the MCB bank can be classified under the
main heads:
 CURRENT ACCOUNT
 SAVING ACCOUNT
 TERM /CALL DEPOSITS
ACCOUNT OPENING
To open an account the customer have to meet the general banking manager
with an introducer (the person who is going go introduce that person in the
bank) and get an application form used for account opening. Different colorcoded application forms are available for each type of account. Along with the
form a card for specimen signature is also supplied to customer. Manager has
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every right not to accept this contract if he is not satisfied by the details
provided by the customer. In case the contract is acceptable to both, now it is
ready to open the account formally.
Procedure
The procedure begins with the punching of account opening form to the
customer file i.e. customer’s master file. The manager records the necessary
details into this register and allots an a/c number from this a/c opening register.
This register is maintained for each type of account and the a/c no’s are allotted
serially. After opening a saving and current account every applicant’s data is
entered into the computer to maintain a safe record and application form is
properly filled so that it can be available when necessary. Checking officer is
responsible to Tele the manual application form with the computerized a/c
opening file. For fixed deposit only that application form is needed which is
prepared manually, because most of the procedure of fixed deposit is done
manually. The signature specimen card contains three signatures of an
applicant, applicant a/c no, a/c type, branch code, title of a/c, it will be attached
with an application form. Banker uses this card at the time when he receives
the cherub; he compares customer’s signature with the signature on the cherub
for avoiding fraud.
ACCOUNTS TYPES
Though in theory there many types of accounts but commonly account
operators can be classified in one of the following categories, each have
different documentation requirements:
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 Single
 Joint
 Partnership
 Private Limited
 Public Limited
SINGLE
Only one person can operate this a/c.
An individual who can fulfill the
requirement of bank can open this a/c. We can call it a personnel or individual
a/c. The requirements for this type are National Identity Card Photocopy,
Minimum Deposited Balance, Account Opening Form, Letter of Kinship etc.
JOINT
In case of joint a/c applicant mentions that how much person will operate the
a/c. Instruction are given for joint a/c such that the account shall be operated by
anyone or more. The requirements for this type are National Identity Card
Photocopy, Minimum Deposited Balance, Account Opening Form, Letter
Kinship, Additional Signature Form (For Joint Account), Declaration regarding
the operator of account.
PARTNERSHIP
For partnership a/c, along with the application form other requirements needs
satisfied.
The requirements for this type are National Identity Card Photocopy, Minimum
Deposited Balance, Account Opening Form, Registration certificate, agreement
among partners and Commencement of business and
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resolution of board of directors, commencement of business, memorandum and
articles of association and balance sheet etc.
PRIVATE LIMITED
Such type of account is opened in the name of the businesses having private
limited concern and mostly medium business enterprises open such kind of
accounts. All the board of directors have to submit the declaration regarding
the account operator on the company pad and with the rubber stamp with the
signature of the all the members of the board of directors. In case of any change
in directors bank must be informed regarding that. In case funds are borrowed
by the company all the directors approval is necessary rather not only the
authorized partner who can be the operator of the account.
PUBLIC LIMITED
Public Limited A/C type of account is opened in the name of the businesses
having Public limited concern and mostly medium business enterprises open
such kind of accounts. All the board of directors have to submit the declaration
regarding the account operator on the company pad and with the rubber stamp
with the signature of the all the members of the board of directors. In case of
any change in directors bank must be informed regarding that. In case funds are
borrowed by the company all the directors approval is necessary rather not only
the authorized partner who can be the operator of the account.
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ACCOUNT CLOSING
There are no. of reasons of closing an account can be one of the following if
customer desire to close his account, in case of death of one account holder,
bankruptcy of the account holder and If an account contain nil balance or not
up to the requirement of rules.
Before closing any account, bank send letter to the account hold for informing
him that his account is going to be closed. There is need an approval form
higher authority to close any account.
CURRENT ACCOUNTS
Current deposits are those which are payable to bank whenever demanded by
the customer. Bank does not pay any profit on current deposits. There are of
different scheme of saving deposits, which are classified under different
duration purpose and rate of interest. Fixed deposits are those deposits which
are by the bank under the conditions that they will not be payable on demand
but will be payable under fixed or determinable future time date.
FEATURES
A sum of Rs. 500/= in cash as initial deposit is required for opening a current
account and the same may be maintained as minimum average running credit
balance. No profit will be paid on credit balances held in current accounts. The
bank reserves the right to allow opening of current a/c at its description. All
deposits and withdrawal from a current a/c will take place only at the branch
where the account is being maintained. Current a/c cannot be overdrawn,
except by prior agreed agreements with the bank. The correspondence relating
to current A/Cs should be addressed to manager of the branch where the
account is being maintained. A distinctive number will be allotted to each
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current account and shall be quoted on all correspondence relating to the
respective account and at the time of making deposits and withdraws.
The account holder can draw sums from his account by means of cheque
supplied to him by the bank for that particular account. Account holder should
take well care of the chequebooks issued to them. The account holder will pay
excise duty of Rs.4 per leaf to the government.
PAY–IN SLIP
This slip is used for depositing the additional amount. The bank will accept the
Pakistanis notes. All cheques and other instruments should be crossed before
they are deposited for credit into the account. There shall be no restriction on
number of withdrawals in current account. The account holder is expected to
maintain a minimum running credit balance of Rs.500/. An account holder
wishing to close his account must surrender the unused cheques to the bank.
The current account is computerized, thus it generate the statement of account
for all account holders periodically. Incidental charges are beard by the account
holder if its credit balance is less than Rs.500/. Service charges of RS. 20/= will
be taken by the bank, if an account is closed within 6 months from the date of
its opening.
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Financial
Products
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SAVING ACCOUNT
Saving accounts are opened on proper introduction with sums of credit balance
within certain limit for individual (single, joint) institutions, companies,
educational institutions etc. MCB has introduced various schemes under saving
a/c are following:
 Mala Maal Scheme
 PLS Account
 Saving 365 Account
 Capital growth certificate scheme
 Fund Management Scheme
 Khanm Bachat Scheme
 Khushali Bachat Account
 Term/ Fixed Deposits
MAAL-A-MAAL SCHEME
This scheme is recently launched by the MCB after severe financial crisis of
year 1998 created as result of atomic bomb explosion, to mobilize the deposits.
It is the most profitable scheme of the bank and MCB has got
Rs. 20 billion deposits through this scheme and the certificate is for Rs. 25000/-
Procedure
The procedure of Maal-a-Maal certificate is very simple. The applicant has to
fill the slip of certificate where he have to write Branch code, Applicant’s
name, ID Card Number, Address, Phone #, Date and tenure etc. For different
tenure different profit percentages are declared as show below:
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Tenure (Months)
Rate of Return (%)
Two
06
Four
07
Eight
08
Twelve
10
These certificates are automatically renewable after maturity. Copy of ID card
is attached with certificate. Profit is calculated at the time of drawing. At
register, the officer writes reference or serial #, name of applicant, certificate #,
date of issue and date of maturity. At Maal-a-Maal certificate, the officer write
date of issue, maturity date, reference #, and name of the applicant.
PROFIT & LOSS SHARING (PLS) ACCOUNT
This account was started in 1980s after the issuing of banking ordinance in
1980 by Zia Government to develop Islamic banking in Pakistan. In this case
customer would be responsible for bearing profit as well as loss. The bank
would be within its rights to make investment of credit balances in the PLS
saving accounts in any manner at its sole discretion and to make use of the fund
to the best of its judgment in the banking business under the PLS system. For
withdrawal of larger amount, 7 days notice in writing is required to be given:
 Minimum balance is Rs.500/=
 Below minimum balance charges will be debited
 Not more than eight withdrawals in a year allowed
 More than Rs.15000/= are not allowed to draw
 Seven day notice is required for withdrawal
 Profit calculated on monthly basis
 Profit paid on annually basis
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 Profit paid on lowest balance at the end
 10% Withholding Tax on minimum balance
 Zakat deducted on @ 2.5%
SAVING 365 ACCOUNTS
This account is newly developed of MCB and it provides flexibility of saving
account to business people. Profit on deposits will be payable on daily product
basis on balance of RS. 500,000/- and above. However, if balance in the
account falls below RS. 500,000/- on any day, the product will be ignored.
There will be no restriction on withdrawal from the account.
Zakat and
withholding Tax is also applicable on the account opened under this scheme.
 Minimum balance is Rs.500,000/=
 Below minimum balance, profit calculation ignored
 Profit calculated on daily basis
 Profit paid on annually basis
 10% Withholding Tax on minimum balance
 Zakat deducted on @ 2.5%
CAPITAL GROWTH CERTIFICATE SCHEME
 Long term deposit
 Profit rate as that of PLS Saving Account
 Minimum amount of deposit is Rs. 10,000/=
 Amount deposited double in of 5 years
 No maximum limit of Deposits
 10% Withholding Tax on minimum balance
 Zakat deducted on @ 2.5%
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FUND MANAGEMENT SCHEME
 Rate of return upto 15% per annum
 Offered to corporate and business community
 Development of secondary market for Government Securities
 10% Withholding Tax on minimum balance
 No maximum limit of deposits
 Zakat deducted on @ 2.5%
KHUSHALI BACHAT ACCOUNT
 Saving type account
 Rate of return is 8% per annum
 Profit calculated on daily basis
 Profit paid on half yearly basis
 Utility bills can be debited through this a/c
 No charges will be debited for utility payments
KHANUM BACHAT SCHEME
 Designed to support small savings of people
 Depositing money for 10 years
 No return until 10 year
 Payments are made on monthly basis
 No limit for monthly payments
 After 10 year return will be on fixed rates
TERM DEPOSITS
Term deposits are fixation of certain amount of money for a specific span of
time. These can be of majorly two types i.e. short term notice deposits and long
term notice deposits. Different rates are charged for different period of times
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like as shown by following table. If presented before maturity then previous
period rate would be charged.
Duration
01 month
Rate Of Interest
08.1%
02 month
10.1%
03 month
11.0%
06 month
11.5%
01 year
12.5%
02 year
13.3%
03 year
14.5%
05 year
16.4%
The instrument term deposit is like a slip containing issuing bank name, a/c #
to operate on computer, deal #, customer name, reference #, date of issue,
amount, rate maturity date etc.
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CALL DEPOSITS
These call deposits are presented in the bidding process as guarantee or security
from the bank that this much money is deposited in the bank. These are made
in the favor the party offering contract or any other person. The bank offer no
interest rate on it because these can be called at any time. For encashment the
applicant must have to cancelled the call deposit instrument from its
beneficiary. For collection the beneficiary usually send the authority letter for
paying in the shape of Demand Draft or pay order. The call deposit instrument
containing the information regarding applicant and beneficiary name, joint
name a/c opened, signature cards for encashment, reference #, amount, date of
issue, authorized signature etc.
OTHER PRODUCT / SERVICES
The privatization process for the expansion and diversification of
economic activities in the country also demanded the introduction of
new banking products. MCB took initiative in this direction and for the
first time MCB devised and marketed new products and services with
brand names to enter the varying requirements of its d iverse customers.
MCB currently have following products or services in banking sector
that are making it more prominent in the banking sector:
 Night Banking
 Fax Utility
 Consultancy Services
 Traveler Cheques
 Self Supporting Scheme
 Utility Bills Collection
 Credit Cards
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 ATM
CONSULTANCY SERVICES
In the process of privatization of public sector units, prospective buyers
need professional assistance and MCB, with its expertise offers to their
specialized service for valuation of the market value of the industr ial
unit, preparing bid documents and arranging finance for the purchase of
the unit.
SELF SUPPORTING SCHEME
 Loan for poor/needy people
 No mark-up charged
 Maximum amount of Rs. 25,000/=
 Minimum amount of loan Rs. 5,000/=
FAX utility
 Pioneer to introduced Fax for customer service.
 Facilitates speedy transfer of funds.
 Within an hour any where in Pakistan.
 Charges are debited to Customer account.
NIGHT BANKING SERVICES
 To facilitate business community
 Only in commercial trades centers premises
 Clients can make deposits upto 8:00 pm
 Date moved to next for all such transaction
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UTILITY BILLS COLLECTION
 Utility bill collection for maximum customers
 Objective is to create interaction with customers
 Currently 1050 branches are performing this job
MCB RUPEE TRAVELERS CHEQUE
 Can be a safest way to carry cash
 Cheque is accepted at trade centers & branches
 No need to be a/c holder for traveler cheques
 Cheque is signed once when issued.
 Upon delivering second signed are made
 In case of theft no fair to encash
 But informing bank is necessary if thefted
ATM (Automated Teller Machine)
 Minimum balance of Rs. 500/=
 No charges are debited per transaction
 Only two hundred per annum debited
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REMITTANCES
The need of remittance is commonly felt in commercial life particularly and in
every day life general. A major function of any banking system is the transfer
of funds from one client or one place to another. By providing this service to
the customer the bank earns a lot of income in the form of service charges. This
department deals with local currency remittance i.e. remittance from one city to
another without actually carrying the currency. MCB uses following instrument
for transferring of money:
 Demand Drafts (DD)
 Pay Order (PO)
 Telegraphic Transfer (TT)
 Mail Transfer (MT)
Demand Drafts (DD )
DD is a written order given by the branch of the bank on behalf of the customer
to other branch of the same bank to pay the certain amount to the customer. DD
are issued for the particular place other than place of issuance. A drafts is a
Cheque drawn by a bank on its own branch or any other branch of another bank
at a different place requesting it to pay on demand a specified amount of money
which is already received to the person named on it. DD is of following two
types:
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 DD payable
 DD Paid Suspense a/c
In the first type as advice reaches for payment the immediately pay to the
customer while in later as DD presented by the customer, it is paid and the
suspense account is debited.
Documentation
A printed application form is provided for filling in completely and signing by
the applicant. After depositing an amount of draft and commission of the bank,
duly completed and signed by two authorized officers, then it is handed over
the applicant and credit order is dispatched to drawee branch. Following are the
pre-requisites for the processing of DD:
 Bank Serial No
 No. of DD
 Central No
 Test Key
 Rs.60 Postage charges
 0.02% With holding tax
Pay Order
For this kind of remittance the payer must have the account in the issuing bank.
Pay order are more liquid as compared to cheques because cheques may be
dishonored while PO can’t be. It is written order issued by the bank drawn and
payable on itself. It is used for local transfer of money from one person to
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another person. It is also used by the public for depositing money with
Government or Semi Government department.
DOCUMENTATION
The party who requires a pay order will get a printed application from the bank.
He will fill it and deposits the amount and commission. The bank charges are
same as on demand draft.
 Bank Serial No.
 No. of PO
 Central No.
 0.02% With holding tax
TELEGRAPHIC TRANSFER (TT)
In this case the authority is given from one bank to other on the behalf of the
customer through telecommunication to debit their inter office account through
them and credit their parties account mentioned in TT. It is an inter bank
transaction. Telegraphic transfer is an instant transfer of funds. Through this
method applicant can transfer money from one place to another place. There
are two types of TT, Both types of TT are maintained in separate registers, test
is applied by the manager of every amount of TT.
 Incoming TT
 Outgoing TT
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Applicant has to fill a form along with depositing amount to be transferred and
bank commission. MCB charges the commission at the same rate as in the case
of demand drafts.
Documentation
 Issuing Branch Name & Code
 Beneficiary Branch Name & Code
 No. of TT
 60 Rs Postage and 140 Rs for Fax
 Amount in words & Figure
 0.02% With holding tax
 Test key
Mail Transfer (MT)
As the name shows, it is transfer of money in the shape of document through
mail. Procedure is like TT. The transfer of funds from one place to another by
mail is called Mail Transfer (MT). The MT can be foreign or domestic. The
applicant who is desiring to remit the funds by way of Mail Transfer can either
deposit cash or ask the bank to debit his/her account with the cost of MT
including the bank charges. These all measures are for safe transfer of funds.
Documentation
 Issuing Branch Name & Code
 Beneficiary Branch Name & Code
 Number of MT
 Amount in words & Figure
 0.02% With holding tax
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 Test key
CASH DEPARTMENT
In cash department both deposits and withdrawals go side by side. This
department works under the accounts department and deals with cash deposits
and payments. This department maintains the following sheets, books, ledger
of account:
 Cash received voucher sheet.
 Cash paid voucher sheet.
 Paying-in-slip
 Cheque Book
 Cash balance book
Cash department is performing its job completely through computers. The
following staff members are performing their duties with patience and hard
work. Only two peoples are working in cash department named Mr. Ashraf
OG-II and Mr. Arshad OG-III with one computer with them.
Cash Paid Sheet
The only instrument that can be used to withdraw an amount from an account is
the Cheque book. No payments are made by another instrument. Cheques can
be of two types, they may be presented at the counter and encashed and the
others are clearing or transfer cheques.
Cashier manually inspect the Cheque for following:
 Signature & date
 Cross cutting
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 Drawee’s a/c title
 Amounts in words & figures
 Two signatures at the back
The cheques should not be stated as post dated. If in the Cheque there may
discrepancy regarding any of the aspects described above the cheque is
returned to the customer for rectification. On other hand if the cheque is valid
in all respects, the cashier enters the necessary inputs in the computer and post
the entry so that account balance is updated.
When cashier posts these entries, computer automatically display the balance
before posting the transaction amount, balance after posting. The cashier easily
and quickly see whether the amount being withdrawn so exceed the balance or
within the balance. If the amount does exceed the balance then it is upon the
discretion of the manager to allow an overdraft and not depending upon the
customer’s reputation. If he does not allow an over draft, the procedure is
repeated again as described for the mismatch of the signature Cheque is return.
The detail of notes (currency) is written on the back side of the Cheque. The
cashier at the same time maintain the “Cash Voucher Received Record Sheet”.
Then once again inspect the signature of the customer cancellation mark of
checking officer and stamp of “POSTED” is placed on cheque before hand
over the cash to customer.
Cash Received
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For depositing the cash into customer’s accounts, there is need to fill in the
paying-in-slip giving the related details of the transaction. This paying-in-slip
contains the date, a/c/no, a/c title, particulars, amount being deposited and
details of the cash. There are two portion of the paying-in-slip. The depositor
signs the one part of the paying-in-slip one is retained by the bank to show an
acceptance of the entries made in the slip. The different colored paying-in-slip
are used for all the types of deposits. Only the slips related to a particular type
of a/c is acceptable by the bank. For example current paying-in-slip for current
a/c and saving paying-in-slips for saving a/c etc. The paying-in-slip serves as a
voucher to update to computerized transaction ledger. The transaction ledger is
only updated by paying-in-slip and Cheque. The cashier responsible to receive
both the paying-in-slip and cash from the depositor. The cashier check the
necessary details provided I the paying-in-slip and accounts the cash and tallies
with the amount declared in the slip. If the amount does not tally with the cash
given, the deposit is not entertained until the customer remove the discrepancy.
On the other hand if the two amounts tally, the cashier fills in the “Cash
voucher received Record Sheet” and assigns a voucher no. to both the
transaction being made in the sheet and the slip. This voucher no. starts with
one and continue by serial increments of one for each day till the closing of the
sheet, the cashier fills the voucher no, an account, cash day till the closing of
the sheet. The cashier fills in the voucher no, an account of, cash entry in the
related type of a/c and he post his initials on both part of the voucher. Then the
cashier send both to the accountant who verifies all the entries in the two
documents, if the entries in the two documents, if the entries in the two
documents tally with one another, the accountant authenticates the two by
singing on the two documents and posting stamps on the slip. One part of the
slip is then returned to the customer and other is given to the computer
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operator. A very important check is that the dates mentioned into the two
documents must be the same.
The 2nd cashier posts the transaction entries in computer ledger. This ledger
contains the a/c no, a/c title, voucher no, voucher date, transaction code,
transaction amount. After posting these entries, computer display before
posting balance and after posting. On every transaction computer generates an
output of transaction ledger. He assigns the stamp “POSTED” on the voucher
to show voucher transaction entries are posted. Checking officer receive this
voucher and the compute output transaction ledge, he manually inspects the
entries of ledger and voucher. If both are tallied, he then signs the ledger and
put a mark of cancellation on the voucher. After the verifications from the
checking officer, cashier receives the voucher.
CASH BOOK BALANCE
At the end of the working day cashier is responsible to maintain the cash
balance book. The cash book contain the date, opening balance, detail of cash
payment and received in figures, closing balance, denomination of government
notes (Currency). It s checked by manager. The consolidated figure of receipt
and payment of cash is entered in the cash book and the closing balance of cash
is drawn from that i.e.
Opening Balance Of Cash + Receipts - Payments = Balance
The closing balance of today will be the opening balance of tomorrow. This
department is one of the most important department of the bank. All the books
maintained in this department are checked by officer.
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CLEARING DEPARTMENT
All the external functions of clearing are carried by NIFT (National Institute of
Facilitation Technology) while the internal operations are performed by
clearing department which would be discuss later. NIFT is providing
tremendous facilitation having error rate of 0.3%. It is just like any courier
service which takes the cheques of other banks and delivers the cheques of that
branch to it.
Clearing is a system by which banks exchange cheques and other negotiable
instruments drawn on each other within a specified area and thereby securing
the payment for its clients through the clearing house. A clearing house is a
general organization of the banks at a given place, Its main purpose is
offsetting the cross obligation in the form of cheques. When there are many
banks in the country each will receive a number of cheques drawn on other
banks, deposited within for collection. A clearing house is an organization
where these cheques are brought and the mutual claims of each bank on the
other are offset and a settlement is made by the payment of differences. The
representatives off all the banks in Pakistan attend office of the bank which is
performing these duties of clearing house, on each business day at a fixed time.
They deliver cheques that their bank may have negotiated and receive in
exchange cheques drawn on their bank negotiated by other bank. The
responsibility of smooth cooperation of the clearing function lies with the State
Bank of Pakistan.
The operation of clearing refers to the collection of cheques drawn on other
banks. These cheques may be drawn on UBL, HBL, NBP, or any other bank of
Pakistan. The respective clerk collects all cheques and enter them in clearing
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Register. Then he affix a stamps on these cheques and sorts out cheques of
different banks and prepares. schedule for them. These cheques are sent to
clearing house. State Bank of Pakistan has extended the service of Clearing
House. MCB will receive all the cheques drawn by other banks. Finally they
exchange their cheques mutuality. MCB representative will give cheques of
UBL, HBL, ABL, NBP, and SBP to their representatives, and get the cheques
drawn on MCB from these representative.
Further they settle their account. State Bank of Pakistan representative will
work out the balances and will settle their account from their balances with
State Bank of Pakistan. The amount of the cheques are credited in the account
of depositor on the 2nd or 3rd day. If the cheques are not returned it is under
stood that all the cheques are honored.
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Credit
Department
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ADVANCES DEPARTMENT
It is another major department of the branch. Bank provides this facility to the
people who need advance money to meet their requirements. For getting the
advances, the first step is the preparation of credit proposal. Some principles of
lending are considered whenever financing being is made. These principles are:
 Character
 Capacity
 Collateral
 Capital
 Condition
REQUIRED INFORMATION
 An assessment of his business abilities
 Accurate & up-to-date financial statements
 Market reports about the borrower
 Party dealing with other banks
 Nature and structure of borrower business
 Names of proprietors, partners or Directors
 Detail of companies associated with borrower business
 Financial condition of borrower business
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PREPARATION OF CREDIT PROPOSAL
At first, a formal application for credit approval is obtained from the party
along with complete group position. The parties credibility report is also
obtained from the banks from which the party has been doing the business. The
party creditability report is also taken from the head office of Trade
information Division.
For obtaining credit, party has to submit the last two years Balance Sheet and
Profit & Loss Statement duly attested but authorized auditors. If the party also
involve in export or import business then the bank also consider the data of
three years about imports and exports.
The Current and Debt equity ratio is also calculated by the bank.
Then recommendations are made the type of data required to prepare the credit
proposal is to be gathered from different departments. Some data is obtained
from the foreign exchange department. Some data is obtained from current
account department and some data is available in Advance Department. The
purpose for which the financing is required should be explained very clearly.
The securities offered by the party to the bank is also evaluated. In case of
pledging of the property in shape of land or building the complete evaluation of
the property should also be attached.
After all the requirements and necessary documents for applying for advances
is fulfilled by the party then, the case is sent to the Chief Manager for approval.
If the manager find any discrepancies, he may write on these documents. If the
credit limit is in his range, he may approve the party for credit. If the amount is
exceeding the Chief Manager send the case is forward to the Circle Office for
approval and here the same procedure is repeated and if the credit amount is in
the range of GM, he can approve and if the credit amount is very large from
Circle Office, the case is then sent to Head Office and if it is a real big then is
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to be decided by Board of Director. MCB provides advances which are two
types. These are two types of advances:
 Secured Advances
 Unsecured Advances
In secured advances, the bank takes any security against the loans while in case
of unsecured advance no security is taken by the bank.
ADVANCES TYPES
MCB usually classified advances in to following types:
 Agricultural Advances
 Commercial Advances
 Industrial Advances
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COMMERCIAL ADVANCES
MCB divided the advances in to two major types:
 Fund Based
 Non Fund Based
In the fond base advances, the funds of MCB is involved and in Non
Fund based only guarantee is given by the bank.
Fund Base Advance
MCB have following Fund base facilities of advance in its corporate
branches. The details of these types would be later. These are as
follows:
 Demand Finance (DF)
 Cash Finance (CF)
 Running Finance (RF)
 Foreign bills purchased (FBP)
 Local Manufacturing Machinery (LMM)
 Payment against document (PAD)
 Finance against imported goods (FIM)
 Finance against purchase collection (FACP)
 Finance against foreign bills (FAFB)
 Export Refinance Part I (Pre Shipment)
 Export Refinance Part I (Post Shipment)
 Export Refinance Part II
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DEMAND FINANCE
This is a type of secured loan and demand loan never allowed without
security. It is a type of long term financing. MCB also gives loan under
the head of demand finance to individuals, industrial units commercial
business etc.
CASH FINANCE
In this, the borrower gives a specific reason for the need of cash. MCB gives
the facility of cash credit to business. The amount is passed through voucher
and credit to the party account. Normally 0.60 paisa per thousand is charged on
daily basis to customer.
RUNNING FINANCE
These finances as evident by the name are given to the business to meet their
daily needs. The mark up is charged on daily balances. This type of advances
are given to trade, commerce and manufacturing for general purpose. Normally
0.60 paisa per thousand is charged is charged on daily basis. It is drawn
through Cheque.
FINANCE AGAINST IMPORTED MERCHANDISE
This type of advances are granted against the pledge of imported merchandise.
The goods imported are pledged by bank. Bank pays all the charges to exporter
and customs and keeps the goods in its control. On payment from the client to
bank, the bank releases these goods.
EXPORT REFINANCE PART-I PRE-SHIPMENT
This type of loan is provided by the bank to the customer at the rate of 12% for
the period of 150 days. The bank provides this type of advance facility to those
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exporters who have not enough money to make shipment. To promote the
export, the government pursue the Banks to provides loans to the exporters.
EXPORT REFINANCE PART-I POST SHIPMENT
This type of facility is provided to the customers who have enough amount of
money to make first shipment but not more. So the bank issues a loan to the
exporter, this financing is for period of 150 days. Finance is provided by the
SBP to exporters for the purchase of raw material and for its processing
packing and shipment. The mark up rate currently set by the SBP is 12%. In
case, if the party is unable to make the shipment within 150 days of financing.
The party has to pay certain amount of finance as asked by the SBP and after
150 days the markup rate also charges up @ 60 paisa per thousand per day. So
usually exporters tries to make the shipment within the fixed period set by the
SBP which is usually 150 days.
EXPORT REFINANCE PART-II
In this case the bank after receiving the performance of years in export business
of the party the limit is set for a period of one year. Here the limit cannot be set
by the terms pledged of the permission of the bank.
FINANCE AGAINST PURCHASE OF COLLECTION DOCUMENT
The bank provides this type of advance facility to those exporters who have not
enough money to make shipment. A bill(Cheque, draft, etc.) may be purchased
by the bank. Bank pays the amount to the client after deducting its commission.
FINANCE AGAINST FOREIGN BILLS
This facility is given to the exporter, If he needs an urgent money. Bank also
provides finance against the foreign bills. He gives bills of exchange to the
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bank as a security and bank send these bills for collection and bank gives
money to he exporter.
FOREIGN BILL PURCHASE
The exporter which are under L/C are also provided with the facility of loan.
Amount is given to the exporter after the approval of L/C by the issuing bank.
LOCAL MANUFACTURING MACHINERY
The bank provides this facility to the business man who wants to buy the local
manufactured machinery. LMM funds are provided by the SBP. Rate of
markup for this type of loan facility is 12% on this type of loan.
PAYMENT AGAINST DOCUMENT
Bank make the payment to party against document and upon expire date. Bank
receives back money with mark up in this type of lending.
Upon receipt of the documents negotiated by the sellers bank. The opening
bank makes sure that documents are according to terms and conditions of the
credit.
Agriculture Credit
Banks Agriculture division deals with the agriculture advances. Bank provides
the Agriculture Advances in order to enhance and support the agriculture sector
of the country. Agriculture advances are of the two types. The types are as
follows:
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 Farm Credit
 Non Farm Credit
FARM CREDIT
These are the credits provided by the MCB for the purchases of inputs for
development of agriculture sector. Following are two main sub classes of Farm
Credit.
 Production Finance
 Development Finance
PRODUCTION FINANCE
These are short term loans. These loans are provided to farmers for purchases
of different type of input, for example, Seeds, Fertilizers, Pesticides. These
loans are provided against personal guarantees or mortgage of land as a
security. Rate of profit for these loans is 10%.
DEVELOPMENT FINANCE
These are medium or long term loans. These loans are provided for the
development of agriculture sector. Main purpose of these loans are to purchase
instrument:
 Tractors
 Implements(Trolley, Thresher etc.)
 Installation of tube-well
 Planting of garden
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The loans are disbursed against security of land (mortgage) or any other
security acceptable to bank. The rate of profit for these loans is 11% to 17%.
NON FARM CREDIT
Second major form of agriculture advance is Non-Farm Credit. These loans are
provided against mortgage of land as a security or pledge of equipment as a
Collateral security. These are medium or long term investment depending up
the project. These loans are provided to boost up agriculture sector to provide
the sources of earning of foreign exchange as well as to provide employment to
people. Following are the different types of small industries for which loans are
provided to improve the economy of the country:
 Fish Farm
 Cattle Farm
 Poultry Farm
 Dairy Farm
Securities
Bankers lend money in the form clean advances against promissory note as
well as secured advances against tangible and marketable. These reports are
only valid MCB normally allow the advances to the customers against the
following types of securities:
 Bankers Lien
 Mortgage
 Pledges
 Hypothecation
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Bankers Lien
This type of security is accepted in case of advances against share, life policies,
bonds, ornaments and fixed deposits etc. It is type of most liquid security.
Mortgages
There are two types of Mortgage. These are following:
 Legal Mortgage
 Equitable Mortgage
Legal mortgage and equitable mortgage are accepted in case of immovable
properties like land, building and machinery etc.
Pledge
This type of security is accepted in case of stocks or raw materials. In a pledge,
the borrower has not right to sell the stocks with the permission of bank.
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Foreign
Exchange
Department
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FOREIGN EXCHANGE
H. E. Evit states that “the means and methods by which right to wealth express
in terms of currency of one country are converted into rights to wealth in term
of the currency of another country are known as foreign exchange”.
Encyclopedia Britannic defines Foreign Exchange as “a system by which
commercial nations discharges their debts to each other”.
WHY?
 Nature has granted its wealth unevenly
 Need of Imports & Exports
 Because no international Money unit exists
IN MCB
This department works like general banking department with the difference that
it deals in foreign currencies like US ($) and Pound Sterling, Dutch Mark
(DM), Euro and Japanese Yen (Y). This department deals with the following
products/services:
 Foreign Currency Accounts
 Foreign Remittances
 Foreign Bills for Collection
 Selling of Government Certificates
 Imports & Exports
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Foreign Currency Accounts
These accounts can be operated foreign national and Pakistani National. The
foreign currency department deals with the following types of accounts:
 Dollar Khushali account
 Current account
 Saving bank account
 Term deposit
 Prime Currency Scheme
Foreign accounts are convertible on floating rate available to the bank. The
account holder is free to operate the account. To the extent of available balance,
for remittance any where in the world in the world and for whatever purpose.
Remittances in any convertible foreign currency can be accepted, these
remittances will however be converted into US $, pound sterling, DM and
Japanese Yen at the ruling rate before crediting to these foreign currency
accounts.
Travelers cheques, drafts, telegraphic transfers and pay orders are accepted for
deposit. The interest earned on these deposits (saving accounts and term
deposits) is credited in foreign currency and is also remittal freely. The interest
earning is exempted from income tax and no Zakat deductions are made from
the account. The balances in these accounts are freely transferable anywhere.
No permission for the remittances from State Bank of Pakistan is required.
Traveler cheques can be issued to the extent of deposit in the account.
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Term Deposit Accounts
 Issued in US $ and sterling
 Duration of 3 months
 Interest in paid at maturity
Dollar Khushali Account
This scheme is introduced by MCB is 1994. It is service oriented scheme is US
dollar Currency. This account can be opened by all Pakistani and Foreign
national residing in Pakistan or abroad.
Features
 Profit is paid on daily basis.
 Conversion in Rs. From dollar through FEBC.
 No restriction on number of withdraw
 No Deduction of Zakat & Income tax
 Minimum balance to open US $ 100.
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Prime Currency Scheme
Prime Currency Scheme is a saving account of MCB which can be opened for
four types of currencies these are US ($), UK (t), Japanese Yen (Y), Douche
Mark (DM). Remittances from abroad traveler Cheque, foreign currency notes
and foreign exchange generated by encashing FEBC may be deposited in these
accounts.
Features
 Can be opened under single/joint names
 Six months profits are paid
 Facility of FREX notes and travelers Cheque
 Foreigner and Foreign companies can open it
 Profits is given in foreign currency
 No restriction by SBP to open it
 No implementation of income tax
 No Wealth tax and Zakat deduction.
 A/c have the facility to take loan in Pak rupees
FOREIGN REMITTANCES
Remittances to abroad through telegraphic transfer is remitted to the person to
whom it is payable. Bank charges Rs.50/- as its commission. Funds can be
transferee abroad either by drafts and telegraphic transfer in US dollar and
pound Sterling. For transferring money, Client must give specific reason for
sending money abroad. Without any specific reason and proper identification
of person who is remitting amount, bank avoids to transfer money. Similarly
Money gram is used for inward remittances:
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 Foreign Bills for collection
 Government Bills for collection
Foreign Bill For Collection
Cheques and drafts in any other foreign currency deposited by account holders
are sent for collection. If the cheques are drawn within the country i.e. Issuing
Bank is in Pakistan then they are sent to respective branches. If these cheques
are drawn on other countries then these are sent to respective countries. MCB
credits the accounts of account holder when these bills are realized. Banks
credit his account with the same rate of that day on which the Cheque was
deposited with the bank. Bank charges Rs.100/- as its commission and plus
telephone/fax charges if any.
GOVERNMENT CERTIFICATE
Foreign exchange department also deal with different certificates which are
issued by SBP, GOVT. of Pakistan. These are as follows:
 Dollar Bearer Certificate (DBC)
 Foreign Currency Bearer Certificate (FCBC)
 Foreign Exchange Bearer Certificate (FEBC)
The can be bought by Pakistan and Foreigners without any limit on their
purchases. Payment must be in convertible
foreign currencies. These
certificates are issued at par for a period of three years in denominations of
Rs.500,Rs.1000, Rs.10,000. The FEBC are enchashable at any time. Upon
enchasement after one year , the holder of Rs.1000/- certificate get a return of
Rs.14.5 . After two Rs.310.
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These certificates can be purchased by making payment through foreign
currency accounts held in MCB Ltd. The FEBC can be purchased abroad by
paying in any
convertible foreign currency. The profit earned on these
certificate, Zakat will be deducted. A after selling these certificates amount is
transferred to STATE BANK of Pakistan .Bank not utilized the funds which is
received from customer upon conversion of D BC, FCBC and FEBC. Bank
charges Rs.50 upto Rs.10000 of value and 0.01% over Rs.10000 or equivalent.
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IMPORTS & EXPORTS
To enter into an import or export enterprise an individual must follow the
following steps, later I will discuss these in detail:
 Registration at Corporate Law Authority
 Membership with of Chamber of Commerce/association
 NIT # must be obtained from Income Tax Authorities
 Affidavit of not a government servant/ not been black listed
 Submit a photo copy of NID along with the documents
 Company must have a foreign currency account in any bank
 The individual/company must have registered at EPB
 The exporter/importer should have some party in contact
CLA Registration
There are three types of business, namely, Proprietorship, Partnership or firm,
and Corporations. The firms are registered at the office of Registrar of Firms,
where as the companies are registered at the office of CLA. Depending upon
the ownership and capital structure the companies can be classified as private
limited or public limited.
Before a company gets into the business of import or export it must be
registered at CLA. For this purpose an application along with all necessary
documents is submitted to CLA. The necessary data must include:
 The company’s name
 Initial board of directors
 Number of shares
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 Address of company’s office
 The capital structure
 Number of directors
The CLA will process the application and after approval it will issue a
Certificate of Incorporation, under section 32 of Companies Ordinance 1984
(XL VII of 1984). Firms registered at Registrar Office are issued form ‘C’ on
their registration.
CHAMBER OF COMMERCE
It is essential for an importer/exporter to be member of some recognized
chamber or association. Normally the importer or exporter is member of
Chamber of Commerce, however, membership of other chambers or
associations like APTMA, APBUMA, etc. is also acceptable. The
importer/exporter applies for membership along with admission fee of Rs.100
and annual subscription. After the serenity the chamber or association issues a
membership certificate.
The following information is required to be given along with application.
 Name of individual or firm & Address
 Name of directors or partners
 Particulars of business
 Import or export registration number
 National Tax Number
 Bank certificate (photo copy)
 National Identity Card copy
 Photo copy of form C from registrar
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Income Tax Office.
According to the rules the importer/exporter has to pay various taxes in the
national exchequer, like income tax, corporate tax, with holding tax, sales tax,
super tax, etc. For this purpose he must possess a national tax number (NTN).
If the individual/company is already paying income tax then the NTN would
have already been allotted. However, a new exporter/importer individual or
company would require fresh NTN. Income tax return for registered firms.
Income tax return for companies. Documents required for obtaining NTN are:
 Copy of National Identity Card
 List of existing bank accounts
 Copy of certificate of registration
 Copy of partnership deed
 Copy of certificate of incorporation
 NTN (for verification only)
EXPORT PROMOTION BUREAU
The most important part of the process of import/export is registration with
EPB. Before registration of EPB, all the above mentioned steps must be
completed. Furthermore, a foreign currency account must be opened at some
bank, dealing in foreign currency. An affidavit must also be provided by the
exporter/importer that he/she is not:
 Government Servant
 Black Listed
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The application to EPB is processed by the bank on behalf of
exporter/importer. The application form to be filled in by the importer/exporter.
A fee of Rs.1500 for export and Rs.1530 for import registration must also
accompany, which must be paid through pay order. After registration at EPB
the importer/exporter is permitted to start with his/her business of export or
import.
TRADE TERMS
There are many different methods in vogue for the transfer of title of shipment
in the import/export business. These methods are internationally recognized
terminology’s and describe the responsibility of bearing cost and risk involved
during transportation. These terms are briefly described below:
Ex-Works
It means that the seller’s only responsibility is to make goods available at his
premises/factory. He is not responsible for loading the goods in a vehicle
provided by the buyer, unless otherwise agreed. The buyer bears full cost and
risk involved in bringing the goods from there to the desired destination. This
term represents minimum obligation for the seller.
Delivered Duty Paid (DDP)
It signifies maximum obligation for the seller. When followed by words
naming buyer’s premises, it denotes that seller has to bear all costs and risks till
the goods are made available at buyer’s premises. If some costs are to be
excluded these must be clearly mentioned e.g. “exclusive of value added tax”.
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Delivered at Frontier
The seller’s obligations are fulfilled when the goods have arrived at the frontier
but before customers border. Primarily used with rail or road transport, this
term may be used regardless of planned means of transport. (In practice it is
seldom used when goods travel by air or by sea).
Free on Board (FOB)
The goods are placed on board a ship at the seller’s cost. The risk of loss and
damage is transferred to the buyer when the goods pass the ship’s rail.
Cost and Freight (C&F)
The seller must pay the cost and freight to bring the goods to named
destination, but the risk of loss or damage is transferred to the buyer when
goods pass the ship’s rails.
Cost, Insurance & Freight
The seller must pay the cost, insurance and freight to bring the goods to named
destination. The seller has to procure the insurance against the risk of loss or
damage.
Freight Carriage Paid
The seller pays the freight for the carriage of goods to the named destination.
However the risk of loss or damage is transferred to the buyer when good have
been delivered into the custody of the first carrier.
Freight Carriage & Insurance
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In addition to cost and freight the seller must pay for the insurance to bring the
goods to the named destination. The seller has to procure insurance against the
risk of loss and damage.
Free Alongside Ship
The seller’s obligations are fulfilled when the goods are placed alongside the
ship on the quay. The buyer has to bear the cost and risks form that moment
including clearing the goods for export.
Ex-Ship
The seller has to make the goods available to the buyer on board the ship at the
destination, bearing full cost and risk of bringing there.
Ex-Quay
The seller makes the goods available to the buyer on the quay (wharf) at the
destination, bearing full cost and risk of bringing the goods there.
FOB Airport
The seller fulfills his obligation by delivering the goods to the air carrier at the
airport. The risk of loss and damage is then transferred to the buyer.
FREE ON RAIL/TRUCK/CARRIER
These terms have similar implications as FOB, except that these are used with
rail or truck. The term has been designed to meet the requirements of modern
day transport as container carried by trailer or ferries. The seller fulfills his
obligations when he delivers the goods into the custody of the carrier at the
named point. At that time the risk of loss and damage is transferred to the
buyer.
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LETTER OF CREDIT
The marketing of merchandise in foreign involves a long period of time, the
seller or exporter may be unable to carry the burden of financing, such a
lengthy transactions for he may not wish to tie up his capital for such a long
period. It is the assurance of the bank that the payment would be made on
completion of transactions in terms of L/C. The terms of credit could be
documents against payments (DP) or documents against acceptance (DA).
TYPES OF L/C
There are several methods for making payment of an import or export
transaction. These are listed below:
Irrecoverable Letter Of Credit
The issuing bank (importer’s bank) gives a lasting undertaking to accept and
pay bills drawn upon it, to the exporter, upon fulfilling the terms and conditions
stipulated in the Letter of Credit (LC). It gives complete protection to the
exporter.
Recoverable Letter of Credit
The issuing bank (importer’s bank) can modify the LC without any obligation
on its part. These are usually not accepted by the exporters.
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Confirmed Letter of Credit
This kind of LC has the protection of the credit standing of the importer’s as
well exporter’s banks. The exporter’s bank which confirms this LC, takes full
responsibility of making payment if the importer’s bank fails to do so.
Unconfirmed Letter of Credit
Though the issuing bank gives a commitment to honor the drafts, however, it
does not give any guarantee.
From the exporter’s point of view confirmed
irrecoverable LC is the best form of receiving payment.
Modes of Payment
There are four modes payments which are as follows:
 Deferred Credit
 Sight Credit
 Acceptance Credit
 Negotiation Credit
Deferred Credit
The draft is issued by the importer and presented to the bank by the exporter
along with documents (bill of loading, invoice, and insurance). The payment is
made by the bank on maturity of draft.
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Sight Credit
The draft is issued by the importer and presented to the bank by the exporter
along with documents (bill of loading, invoice, and insurance). The payment is
made by the bank if it finds the documents correct.
Acceptance Credit
Bank confirmed that document have been received and payment would be
made within certain time period.
Negotiation Credit
The issued L/C can discounted at any bank and got the amount money that he
required against the L/C issued by the bank.
SHIPPING CLEARANCE
Import or export license is no more required for clearance at customs. Only
requirement is to have registration EPB as importer or exporter. The imported
or exported goods must confirm to the trade policy. The goods have been
categorized as:
Negative List
Goods not permitted to be exported or imported e.g. old machinery, old tires,
export of antiques, obscene and sectarian literature, etc.
Prohibited/ Restricted Goods
These items can be imported or exported but subject to certain conditions e.g.
boilers, medicines, animals, seeds, arms and ammunition of certain bores.
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Procedures
The import and export business is not also a profitable business but also, it
helps in improving country’s economic condition. To improve our country’s
balance of payments we must concentrate upon increasing exports. Though the
specific procedures might differ from product to product, the major steps
follow the same line. The knowledge of such like process would be useful for
an MCB in the practical field.
IMPORTS
When the goods arrive at port or dry port, the importer will file the Bill of
Entry giving the detail of imports, Value of imports, Rate of duty &Tariff.
Customs appraisal officer will carry out an assessment of goods according to
the rules/tariff manual. Depending upon the assessment following taxes will be
remitted by the importer: Custom duty based upon ad valorem, specific rate or
both. Sales tax - 15% of ad valorem + custom duty. With-holding tax 4% of ad
valorem + custom duty + sales tax. Regulatory duty as imposed by the
government from time to time under the power of customs act.
EXPORTS
To dispatch the shipment, the exporter will submit shipping bill. The customs
appraisal officer will examine the goods for correctness of declared description,
value, and claimed duty drawback. Thereafter the goods will be allowed for
shipping.
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Pre-Shipment Inspection
When a bank confirms letter of credit it only guarantees that the payment will
be made after shipment. In other words it assures shipment but relies on
exporter to ship the goods described in the document. To prevent losses due to
substandard shipment, the importers, nowadays, rely upon pre-shipment
inspection agencies for inspection and appraisal of goods. One example of
such company is COTECHNA. These companies help the importer in
establishing correct value of goods prior to shipment.
REBATES,
CONCESSIONS
&
DUTY
DRAWBACK
The government gives incentives to the importers and exporters in the
shape of concessions and rebates/ duty drawback. For example
concessions have been given to the importers of:
 10% duty without sales tax in Textile Machinery
 Duty exempted up to 300MW Power Plants
 Leather Machinery & other Export oriented Goods
Some concessions are provided on freight as recently it has been
provided to the textile sector @ 25% on the export of non quota woolen
and silk products from export development fund.
Duty Drawback
When some raw materials are imported from abroad, the taxes are paid upon
them as part of import policy. If this raw material is consumed in
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manufacturing of exports, the government compensates the exporter by
refunding the taxes (previously collected), in the shape of duty drawback. The
rates of duty drawbacks are announced by the government from time to time.
For example recently duty drawback rates have been announced for textile
industry.
Procedure
After the export remittances have been released by the bank, the exporter will
send application to the rebate section of the custom department. After carrying
out assessment, the Cheque is issued by the treasury department of customs.
Now the government has announced t allow the commercial banks to process
the duty drawback claims and make payments within the laid down parameters.
The steps involved in any international trade transaction are enumerated here.
 The Pakistan Importer places an order with the 4.5 exporter and asked the
American if he would be willing to ship under L/C.
 The US exporter agrees to ship under a L/C and specifies relevant
information such as prices and delivery terms.
 Power Plants The Pak. Importer applies to MCB for a L/C to be
issued in favor of the US exporter for the merchandise the importer
wishes to buy.
 MCB issues a L/C in the Pak. Importer’s favor and sends it to the US
exporter’s bank, the Bank of New York.
 The bank of New York advises the US exporter of the opening of a
L/C in his favor.
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 The US exporter ships the goods to the Pak. Importers on a common
carrier. An official of the carrier gives the exporter a bill of lading.
 The US exporter presents a 90-days (suppox) draft drawn on MCB in
accordance with its L/C and the bill of lading to the bank of New
York. The US exporter endorses bill of lading so title to the goods is
transferred to the Bank of New York.
 The Bank of New York sent the draft and bill of lading to MCB .
MCB accept the draft taking possession of the documents and
promising to pay the now accepted draft in 90-days.
 MCB returns the accepted draft to the Bank of New York.
 The Bank of New York tells the US exporter that it has received the
accepted bank draft, which is payable in 90 days.
 The exporter sells the draft to the Bank of New York at a discount
from its face value and receives the discounted cash value of the
draft in return.
 MCB notifies the Pak. Importer of the arrival of the documents.
He/She agrees to pay MCB in 90 days. MCB releases the documents
so the importer can take possession of the shipment.
 In 90 days MCB receives the importer’s payment, so it has funds to
pay the maturing draft.
 In 90 days the holder of the matured acceptance (In this case, the
Bank of New York) presents it to the MCB for payment. MCB pays.
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Swot
Analysis
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SWOT
STRENGTH
MCB is the first Pakistani privatized bank and because of its quality
management, marketing, innovation in products and services. Owing to all such
factors they have established a good reputation in the banking market. The
name of MCB makes you recall the highly cooperative and professional
individuals ready to serve you with maximum zeal and zest.
MCB have faster banking services that are making it more prominent in the
banking industry especially in operations and Foreign exchange. The customer
prefers this bank not only because of its faster speedy service rather due to
reasonable service charges.
MCB in Pakistan is the also in the list of highly automated banks like Emirates
because of its modern style of banking through fully computerized control and
twenty four hour banking.
The joining of experienced people, advanced management, advance setup and
facilities gave MCB an edge over its competitors.
WEAKNESSES
The majority of people are not well aware about the products of MCB.
Therefore it should advertise extensively especially RTC and Master Cards.
A behavior has been noted that bank tries to feel at ease with good looking, rich
and educated people and the poor looking customers feel some bit strange in
the environment of the bank. The bank employees should try to accommodate
behaviorally all type of customers.
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In MCB there is lack of specialized skill because of job rotation policy of
human resource department. The bank should concentrate upon increasing its
abilities on individual service basis.
Mismanagement of time is another big mistake in MCB branches, the bank
official time of closing is 5:30pm but due mismanagent of time allocation and
work the staff is normally on their seats till 7:00 or 8:00 clock.
OPPORTUNITIES
As on December 31, 1998, sixty-eight scheduled banks with 9,106 branches are
operating in Pakistan. As on this date, total population of Pakistan is 140.03
million. Total number of personal accounts with all scheduled banks as on
December 31,1997, are 28.98 million. If we consider the population statistics
of working age group as on December 31,1997, it stands to the figure of 96.64
million. Thus we can say those 28% of working age people of Pakistan are
having accounts with banks while 72% are unbanked.
The need of privatization has made people to switch to banks to satisfy their
needs of lending and borrowing. This not only increases the deposits but also
the credit business.
THREATS
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Change in government policies have affected the banking business. Still banks
have to wait to get permission of state bank. The freezing of foreign currency
accounts is a vital example of letting people not to trust on banks.
The Competition has become severe by the entrants of so many banks, So to
exist one will have to prove himself in its services through excellent
management and will have to satisfy its shareholders. Otherwise he will be out
the market.
The decrease purchasing power of consumer in the current economic situation
of the country affecting the business activity speed too much and the result is
the low investment from the investors in new projects can create problem for
the bank because it is working a lot in trade.
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Suggestions
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SUGGESTIONS
Bank must let potential customers know that all attractions for banking exist.
This is done by advertising on television and obtaining press coverage, in
conjunction with direct mail, window displays, leaflet in branches and in
appropriate other locations (such as hotels, shops, etc.) and including leaflets in
statement of accounts sent to existing customers in the hope that they will tell
potential customers about the services provided by our bank.
Financially unsophisticated people might feel bank accounts, cheque books,
credit cards, etc. are difficult to understand and to keep control thereof.
Some personal sector customers prefer not to come to branch. They
increasingly want to deal with the bank in other ways, such as home banking or
use of Automated Teller Machines (ATMs), which need to be at the branch or
some important shopping plazas.
It is widely known that there is a substantial Black Economy in Pakistan,
Where people earn income that is undisclosed to the revenues authorities.
Payments for goods and services in the black economy are necessarily in cash,
because transactions by cheques are more likely to be exposed to the revenue
authorities. Some people will therefore avoid bank accounts to preserve secrecy
of earnings.
One way to retain the personal sector customers is to offer a wide range of
services such as tax advice, free life insurance equivalent to amount deposited,
shares portfolio management, fund management facility, etc., complimentary to
the core services. Banks must have a slightly different mix of services. Banks
must have a slightly different mix of services and mean of providing these such
that customers can choose the mix that suits them best.
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Arguably, there has been a little encouragement from banks to persuade people
to open a bank account. Opening hours are restricted, and there is a commonly
held belief that banks operate for their convenience and not for the convenience
of the customers.
A logic leads to promotional campaign through employers who are customers
of the banks and their employees are paid in cash. Such business accounts
should be encouraged to open the accounts of their employees with the banks.
It might be worth offering free banking for a specific period to new accounts or
simply publicizing the services available by means of posters at the employer’s
premises.
It might be possible to attract another type of personal customers through
business accounts, namely directors and denier employees, etc. Again an
incentive package could be put together.
The banks may choose to make its existing products distinctive or to introduce
new products. It is often easier to benefit from adverse changes made by other
banks than to attract customers by innovations.
A short term promotional technique is to offer price incentives, for example,
low interest rates on advances or limited issue high profit bearing term
deposits. Longer term, a Loss Leader may be offered. For example, profit
bearing current accounts are not very lucrative but any bank can not afford not
to offer these. The reduced profits can be augmented by profits made on other
products.
It is also possible to attract/retain personal customers by investment in new
technology like ATMs and Telephone Banking facilities, which made the
services quicker, easier, cheaper and more flexible.
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